Document

What College Students Need to
Know About Their Finances
Ann House, MS, CFCS, CPFC, CEPF
UASFAA
April 17, 2012
For many students:
• They will become well versed in Faulkner, microbiology,
or Mandarin – but not even a basic command of
personal finances.
• Students start college with no real idea how much it
will cost them to live, how much money they will have
to live on and how to make up the difference and many
report having the least amount of money in their lives.
Emily and New York University senior:
“All I had to do was sign on to the Sallie
Mae web site, check off a few boxes and
wait for the money to be disbursed. The
thought of repaying it never really hits
you until graduation is near.”
Countdown
http://www.youtube.com/watch?v=96KiSEMHy7Y
Reality:
• 2 of 3 undergraduates leave with student debt
• Half who start never finish with a degree, but
do have student debt
• Student loan debt has surpassed credit card
and auto loan debt - threatening our fragile
economic recovery
• Studies report that students want financial
management information through their U
College Board Study, 2008
College Students and Financial Literacy, 2006
Also reality:
Students today need our help
• What’s more expensive than college?
Not going to college.
– The typical income gap between the college
graduate and the high school dropout has never
been higher. Today college grads earn 80% more
than people who didn’t finish high school.
– $100,000 spent on college at age 18 would yield a
higher lifetime return than an equal investment in
stocks and bonds.
Hamilton Project
5 Money Management Tips for Students
1.
2.
3.
4.
We all have a money personality
Students need a financial plan
Students need to be organized
Students need to build and keepuild and
keep good credit
5. School is their first priority
What can we do?
1. We all have a money personality
• What are your financial habits?
o What do you buy?
o When do you buy?
o Why do you buy?
o Where do you buy?
o What happens to your budget when you buy?
o What effect does this purchase have on your goals?
*How
did you get this way?*
The influence of family members is important and
complex.
Parents play a key role in students financial
socialization.
Parents’ politics and religious beliefs are most
influential in their children's financial training.
Most parents don’t know how to constructively
talk to their children about financial management.
•
•
•
•
•
Money is a reward
Money is control
Money is love
Money is happiness
Spending is
irresponsible
• Money has no place in
polite conversation
2. Students need a financial plan
Define financial goals
Make plans to reach these goals
Take action to make the goals become a reality
GOAL
$ NEEDED
BY (DATE)
HOW I WILL REACH MY GOAL
GOAL
$ NEEDED BY (DATE)
HOW I WILL REACH MY GOAL
Emergency fund
$500
July, 2012
Open a savings account (mark it for
emergencies) deposit $167/month
Books
$450
Fall semester,
2012
Save $90 per month
Car
$4800
April, 2016
Open a long-term savings account
(mark it for car) save $100/month
This financial plan includes a school/career plan:
• Many students do not complete school in 4 yrs
due to failure to plan out required courses, add
minors, switch majors, money & personal issues
Students should meet with an academic advisor each
semester.
Compromise – employers care more about skills than
specific major
If working – studies suggest working on campus and
graduation are highly correlated
Unexpected Financial Problems?
http://www.youtube.com/watch?v=ETMkub3NwK0
3. Students need to be organized
•
Select a record keeping
format
•
•
•
•
Mint.com, paper, etc.
Cash flow =
• income – expenses
• As detailed as you want
Do as much as you can
with automatic deposit
The more control, the
more money you have
Why people struggle with budgets:
• No plan for expenses that don’t come every
week
• Don’t track spending
1. To know how much to plan on
2. To keep to the plan
• No allowance for the unexpected
• Vague expenditure categories
• Don’t have an emergency fund
etc.
Pay attention to deadlines (avoid late fees)
Separate needs from wants
Check out banks and credit unions, online banks
Save and invest
Mitigate risk – insurance
Receipts and warranties
Taxes
ID theft and fraud
4. Students need to build and keep good credit
More important than ever before
• Used to determine the interest rate on a loan
• Used to determine your auto insurance rate
• Used by potential employers
• Used by potential landlords
Credit information is used to see how you handle
money and to evaluate your responsibility and
integrity with your personal finances.
Why are employers checking credit?
•
•
•
Shows if
responsible,
accountable, stable
and honest on the
job.
Use of company cell
phone or auto
Differentiates
students
5. School is their first priority
Students financial situation in college can affect
their academic performance. (1 in 3 on the edge of
dropping out due to finances.)
School is the most important job right now and a
college education will be a big payoff down the
road.
Students need to take advantage of school
resources that their fees are covering (counseling,
health, financial help, legal aid, career advice).
Lyons, 2003
Students need to be aware of loan and scholarship
scams and deceptive offers.
Students need to understand their financial aid:
• “I don’t know if it is subsidized or not.”
• “I thought I would buy a car with half my loan.”
• “How do I find out how much I have in loans?”
“I asked about the ‘capitalized Interest’ and found out that it
was the interest on the loan that was accruing while I was in
school. WOW! $17,000.00 accrued while I was sitting in class
trying to figure out how to get ahead in this crazy world. And
apparently- for the last several years, 90% of my payments
have been going to interest. I really am ashamed to admit
this all, but I can't hide anymore.”
Students entering college today may very well
be studying for jobs that won’t exist in a few
years.
o The top 10 in demand-jobs in 2010 were not
even jobs in 2004. (Jeremiah Owyang, Industry Analyst in Silicon Valley)
Without a plan, guidance, research, “putting
your nose to the grindstone,” todays students
may accrue much debt without a successful
outcome.
http://www.youtube.com/watch?v=IcXRV6stU8U
 What can we do?
• Utah does have financial literacy standards in HS
and integrated into K-10
Can colleges and universities build on this?
• Most of todays research on students and financial
literacy refers to credit card use
Do we need a broader definition of financial literacy?
• Need for educational resources for parents
How can we deliver this?
• Need for financial education on campus
“Financial education is not part of your bachelor’s
program, its part of your life.”
Need for a GE requirement for personal finances?
• Holistic approach to student needs
 Resources
Financial counseling centers on campus
Cude, Lawrence, Lyons, et al., 2006